UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the second quarter ended April 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________to _________________
Commission File Number 1-3013
WESTVACO CORPORATION
(Exact Name of Registrant as Specified in its Charter)
Delaware 13-1466285
(State of Incorporation) (I.R.S. Employer Identification No.)
299 Park Avenue, New York, New York 10171
(Address of principal executive offices)
Telephone Number 212-688-5000
(Registrant's telephone number)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12
months, and (2) has been subject to such filing requirements
for the past 90 days. YES X NO
At April 30, 1999, the latest practicable date, there were
100,172,609 shares outstanding of Common Stock, $5 par value.
WESTVACO CORPORATION
and Consolidated Subsidiary Companies
INDEX TO FORM 10-Q
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Statement of Income for the three months
and six months ended April 30, 1999 and 1998
Consolidated Balance Sheet as of April 30, 1999
and October 31, 1998
Consolidated Statement of Cash Flows for the
six months ended April 30, 1999 and 1998
Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market
Risk
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
CONSOLIDATED STATEMENT OF INCOME
[Unaudited]
In thousands, except per share data
Three Months Ended Six Months Ended
April 30 April 30
1999 1998 1999 1998
Sales $679,481 $724,187 $1,330,196 $1,426,300
Other income (expense) 4,611 4,522 13,316 8,782
684,092 728,709 1,343,512 1,435,082
Cost of products sold (excludes
depreciation shown below) 485,836 517,854 950,196 1,019,144
Selling, research and
administrative expenses 56,232 60,218 111,238 117,525
Depreciation and amortization 68,786 69,678 138,117 139,178
Interest expense 30,843 27,553 61,444 55,013
641,697 675,303 1,260,995 1,330,860
Income before taxes 42,395 53,406 82,517 104,222
Income taxes 15,100 18,800 30,000 37,100
Net income $ 27,295 $ 34,606 $ 52,517 $ 67,122
Net income per share:
Basic $.27 $.34 $.52 $.66
Diluted $.27 $.34 $.52 $.66
Shares used to compute net
income per share:
Basic 100,111 101,387 100,188 101,552
Diluted 100,145 102,098 100,308 102,273
Cash dividends per share of
common stock $.22 $.22 $.44 $.44
The accompanying notes are an integral part of these financial
statements.
CONSOLIDATED BALANCE SHEET
In thousands
April 30 October 31
1999 1998
[Unaudited]
ASSETS
Cash and marketable securities $ 91,405 $ 105,050
Receivables 277,971 286,423
Inventories 283,746 285,783
Prepaid expenses 65,611 61,936
Current assets 718,733 739,192
Plant and timberlands:
Machinery 5,073,739 5,079,177
Buildings 661,668 655,020
Other property, including
plant land 223,145 224,229
5,958,552 5,958,426
Less: accumulated depreciation 2,682,009 2,634,702
3,276,543 3,323,724
Timberlands - net 260,563 273,975
Construction in progress 187,436 204,732
3,724,542 3,802,431
Other assets 529,405 467,045
$ 4,972,680 $5,008,668
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable and accrued expenses $ 327,509 $ 346,552
Notes payable and current maturities
of long-term obligations 139,713 99,072
Income taxes 17,695 21,501
Current liabilities 484,917 467,125
Long-term obligations 1,515,121 1,526,343
Deferred income taxes 792,794 768,752
Shareholders' equity:
Common stock, $5 par, at stated value
shares authorized: 300,000,000
shares issued: 103,170,667
(1998-103,170,667) 765,329 764,574
Retained income 1,594,556 1,588,932
Accumulated other comprehensive
income (loss) (104,138) (32,167)
Common stock in treasury, at cost
shares held: 2,998,058
(1998-2,844,300) (75,899) (74,891)
2,179,848 2,246,448
$4,972,680 $5,008,668
The accompanying notes are an integral part of these
financial statements.
CONSOLIDATED STATEMENT OF CASH FLOWS
[Unaudited]
In thousands
Six Months Ended
April 30
1999 1998
Cash flows from operating activities:
Net income $ 52,517 $ 67,122
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for depreciation and
amortization 138,117 139,178
Provision for deferred income taxes 26,620 27,946
(Gains) losses on sales of plant and
timberlands (6,481) 221
Pension credits and other employee benefits (38,921) (22,107)
Foreign currency transaction loss (gain) 3,251 1,872
Changes in assets and liabilities:
(Increase) decrease in receivables (1,890) 10,673
(Increase) decrease in inventories (4,851) (19,604)
(Increase) decrease in prepaid expenses (5,719) (3,348)
(Decrease) increase in accounts payable and
accrued expenses (12,744) (20,550)
(Decrease) increase in income taxes payable (2,519) (7,626)
Other, net 1,180 (690)
Net cash provided by operating activities 148,560 173,087
Cash flows from investing activities:
Additions to plant and timberlands (125,470) (217,831)
Proceeds from sales of plant and timberlands 11,635 885
Other investments (22,659) 0
Other, net (172) 149
Net cash used in investing activities (136,666) (216,797)
Cash flows from financing activities:
Proceeds from issuance of common stock 5,777 2,761
Proceeds from issuance of debt 498,205 173,383
Treasury stock purchases (9,608) (22,088)
Dividends paid (44,071) (44,743)
Repayment of notes payable and long-term
obligations (462,621) (132,482)
Net cash (used in) provided by financing
activities (12,318) (23,169)
Effect of exchange rate changes on cash (13,221) (1,963)
Increase (decrease) in cash and marketable
securities (13,645) (68,842)
Cash and marketable securities:
At beginning of period 105,050 175,354
At end of period $ 91,405 $ 106,512
The accompanying notes are an integral part of these financial
statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
[Unaudited]
1. Statement of Information Furnished
The accompanying unaudited consolidated financial statements
have been prepared in accordance with Form 10-Q
instructions and in the opinion of management contain all
adjustments (consisting of only normal recurring
accruals) necessary to present fairly the financial
position and the results of operations for the interim
periods presented. These results have been determined on
the basis of generally accepted accounting principles and
practices applied consistently with those used in the
preparation of the company's 1998 Annual Report on Form 10-K.
Certain information and footnote disclosures normally
included in financial statements presented in accordance
with generally accepted accounting principles have been
condensed or omitted. It is suggested that the
accompanying consolidated financial statements be read in
conjunction with the financial statements and notes
thereto incorporated by reference in the company's 1998
Annual Report on Form 10-K.
2. Current Assets
Marketable securities of $23,962,000 ($12,032,000 at October
31, 1998) have maturities of three months or less and are
valued at cost, which approximates market.
Inventories included in the consolidated balance sheet
consist of the following:
April 30 October 31
In thousands 1999 1998
Raw materials $ 48,374 $ 55,580
Production materials, stores
and supplies 67,940 74,338
Finished and in process goods 167,432 155,865
Total $ 283,746 $ 285,783
3. Foreign Operations
Results of unbleached operations for Rigesa, Ltda., our Brazilian
operating subsidiary, were as follows:
Three Months Six Months
In thousands Ended April 30 Ended April 30
1999 1998 1999 1998
Sales $30,272 $48,165 $69,803 $91,213
Net income $ 5,665 $ 8,012 $ 8,773 $13,591
Rigesa's results for the second quarter of 1999 were
negatively affected by a decrease in price and product
mix of 43.4%, due to the effect of the devaluation of the
Brazilian real, partially offset by an increase in volume
of 6.3%. In the local currency, sales for the second
quarter increased 1.5% compared to the second quarter of
1998. Year-to-date results were negatively affected by a
decrease in price and product mix of 34.3%, including the
devaluation of the Brazilian real, which was partially
offset by an increase in volume of 10.8%.
4. Net Income Per Common Share
Basic earnings per share for all the periods presented have
been calculated using the weighted average shares
outstanding. In computing diluted earnings per share,
incremental shares issuable upon the assumed exercise of
stock options have been added to the weighted average shares
outstanding.
5. Comprehensive Income
Effective November 1, 1998, the company adopted Statement of
Financial Accounting Standards (SFAS) No. 130, "Reporting
Comprehensive Income." This statement requires the
disclosure of other comprehensive income to reflect changes
in equity that result from transactions and economic events
from nonowner sources. Other comprehensive income includes
foreign cumulative translation adjustments associated with
the company's Brazilian and Czech Republic operations. There
was no tax expense or tax benefit associated with the foreign
currency translation items. Comprehensive income (loss) for
the second quarter and six months ended April 30, 1999 were
$51.2 million and ($19.5) million compared to $30.8 million
and $41.3 million, respectively, for the 1998 periods.
Item 2.Management's Discussion and Analysis of Financial Condition
and Results of Operations
[Unaudited]
BUSINESS SEGMENT INFORMATION
Three Months Ended Six Months Ended
April 30 April 30
In millions 1999 1998 1999 1998
Sales
Bleached $467.9 $493.4 $ 910.5 $ 972.1
Unbleached 136.9 151.4 272.3 298.2
Chemicals 75.6 81.8 149.8 161.1
Corporate and other items (0.9) (2.4) (2.4) (5.1)
Consolidated sales $679.5 $724.2 $1,330.2 $1,426.3
Operating profit
Bleached $ 46.2 $ 60.5 $ 107.5 $ 127.1
Unbleached 28.6 25.0 45.9 47.2
Chemicals 19.7 14.5 37.2 30.7
Corporate items (52.1) (46.6) (108.1) (100.8)
Consolidated income
before taxes $ 42.4 $ 53.4 $ 82.5 $ 104.2
Results of Operations
Sales in the second quarter of 1999 ended April 30 totaled
$679.5 million, 6.2% less than the same period a year ago,
and reflect an increase in volume of .6% and a 6.8% decline
in price and product mix. Sales for the first six months of
1999 totaled $1.3 billion, a 6.7% decrease compared to the
first half of fiscal 1998, reflecting a .9% decline in volume
and a 5.8% decline in price and product mix. Second quarter
1999 earnings were $.27 per share (basic and diluted)
compared to $.34 per share (basic and diluted) for the 1998
period. Earnings for the first six months of fiscal 1999
totaled $52.5 million, or $.52 per share (basic and diluted),
down 21.8% from the $67.1 million, or $.66 per share (basic
and diluted), earned during the first half of 1998. Earnings
for the second quarter of 1999 include $.03 per share from
the recovery of excess costs associated with the start-up of
a power cogeneration facility at our mill in Charleston, SC.
These costs were incurred primarily in the first quarter of
1999. Second quarter 1998 earnings were reduced by $.05 per
share due to a 30-day strike that affected our envelope
operations. Export sales from the United States decreased
2.5% compared to the second quarter of 1998, and accounted
for 19% of the company's second quarter sales. Total sales
outside of the United States, including sales of our foreign
operating subsidiaries, decreased 13.5% from the prior year
period, and accounted for approximately 24% of consolidated
sales. Currently international demand has begun to improve
for the company's bleached board, as well as saturating kraft
paper used in decorative laminates. Gross profit margin for
the second quarter of 1999 and 1998 was 19%. The 6.2%
decrease in cost of products sold was attributable to
decreases in cost and mix, mainly as a result of cost
improvement initiatives. For the second quarter and the six
months ended April 30, 1999 operating expenses also benefited
from an increase in the non-cash pension credits of $6.4
million and $12.7 million, respectively, reflecting
cumulative favorable investment returns on pension plan assets.
Bleached
Bleached segment sales for the second quarter decreased 5.1%
from the comparable 1998 period. This change reflects an
increase in unit volume of .5% and a decrease in price and
product mix of 5.6%. Bleached segment operating profit of
$46.2 million was down 23.6% in the 1999 second quarter
compared to the 1998 period. Challenging conditions exist in
our coated papers, bleached board and consumer packaging businesses,
which continue to face very competitive markets, although mill
order backlogs for bleached board products showed some
improvement during the second quarter. Increasing imports of
coated papaer in the United States had a significant adverse
effect on our second quarter financial performance. This situation
may improve, however, as Asian economies recover and consume more
paper produced in their region as well as in Europe. Year-to-date,
approximately 22% of bleached segment sales were made to the
tobacco industry for packaging tobacco products compared to
approximately 24% for the 1998 comparable period.
Approximately 14% (1998 - 15%) of the segment sales were
exported or used to produce products for export with the
remaining 8% (1998 - 9%) made for the domestic tobacco
industry for sale in the United States. The current legal,
regulatory and legislative pressures on the tobacco industry
may have an adverse effect on bleached segment profitability.
While we would expect to compensate for such an adverse
effect by continuing growth in other consumer product
markets, these alternatives may not, in the short run, fully
offset any decline in profitability related to sales to the
tobacco industry. In February of last year, six of the
company's eight Envelope Division locations went out on
strike. The strike reduced consolidated earnings by $.05 per
share (basic and diluted) for the second quarter of 1998.
Unbleached
Sales for the unbleached segment decreased 9.6% compared to
the 1998 second quarter. This change reflects an increase in
unit volume of 6.9% and a decrease in price and product mix
of 16.5%. Operating profit for the unbleached segment
increased to $28.6 million from the 1998 second quarter
profit of $25.0 million. As discussed above, the second
quarter benefited from the recovery of excess costs incurred
primarily in the prior quarter at our paper mill in
Charleston, SC. Promising trends in packaging businesses
include improved linerboard prices, increased sales of
unbleached folding carton board and higher shipments in
Brazil in the second quarter than the first quarter.
Rigesa's unbleached operation accounted for approximately 17%
of segment operating profit in the second quarter of 1999,
compared to approximately 25% for the 1998 comparable period,
this decrease is due primarily to the year to date
devaluation of the real of 39%. In the local currency, sales
for the second quarter increased compared to the year earlier
period.
Chemicals
Sales for the chemicals segment decreased 7.6% from the 1998
second quarter. This change reflects an increase in price
and product mix of 3.4% and a decrease in volume of 11.0%.
Operating profit for the chemicals segment was $19.7 million
for the 1999 second quarter compared to $14.5 million for the
1998 period, benefiting from strong U.S. demand for activated
carbon products, cost savings activities and improving Asian
demand for products used in fabric dyes and asphalt.
Liquidity and Capital Resources
At April 30, 1999, the ratio of current assets to current
liabilities was 1.5 compared to 1.6 at October 31, 1998.
Cash flows from operations totaled $148.6 million for the six
months ended April 30, 1999, compared to $173.1 million for
the comparable 1998 period. New investment in plant and
timberlands totaled $129.9 million for the first six months
of 1999, compared to $217.8 million for the same period of
1998. Cash payments for these investments totaled $125.5
million compared to $217.8 million in 1998. This planned
lower level of capital spending follows the completion of
several important initiatives that added significant support
to our long-term strategy. At April 30, 1999, the amounts
committed to complete all authorized capital projects totaled
approximately $162.5 million. Current estimates indicate
that 1999 capital spending will total approximately $250
million, down from a previous estimate of $275 million, and
equal to about 90% of annual depreciation. During the
current quarter the company completed the purchase of a $22.7
million equity interest in a new consumer packaging plant in
Guangzhou, China.
The company may from time to time use outside sources as
needed to finance future capital investments, as it has in
the past. On May 25, 1999, the company filed a shelf
registration statement for $600 million to permit the
issuance of new debt that in part it plans to use to
refinance bond issues totaling about $300 million. Such debt
issues have interest rates from 10.1 to 10.3% and will mature
between 2018 and 2019. The refinancing is expected to result
in a one-time pre-tax charge of up to $15 million in the
fourth quarter and annual pre-tax savings thereafter up to
$10 million in interest expense. The company had $105
million in commercial paper outstanding at April 30, 1999.
The company maintains a $500 million revolving credit
agreement. There was no borrowing under this arrangement
during the current period. The ratio of debt to total
capital employed was 34% at April 30, 1999 and October 31, 1998.
Accounting changes: In 1999, the company is required to adopt a
new accounting standard issued by the Financial Accounting
Standards Board (FASB), Statement of Financial Accounting Standards
(SFAS) 131, Disclosures about Segments of an Enterprise and
Related Information. Also, the company is required to adopt
SFAS 133, Accounting for Derivative Instruments and Hedging Activities,
in fiscal year 2000. Recently the FASB issued an exposed draft that
would delay the required adoption of this standard for one year.
The company does not believe that the adoption of these
statements will have a material effect on the results of
operations.
Year 2000
Westvaco has implemented a structured program encompassing
both information and noninformation technology systems to
identify and eliminate all Year 2000 problems. Domestically
and abroad, the program consists of six phases (inventory,
assessment of business criticality, technical assessment of
potential Year 2000 failures, remediation, testing and
contingency planning) and includes a review of all computer
hardware and software, whether used directly to support
business and manufacturing processes or embedded in
components of machinery and other equipment. The first three
phases have been completed. The remaining phases are well
under way and scheduled to be completed by June 30, 1999,
with primary attention being given to business critical
systems.
For business systems, the remediation and testing phases are
substantially complete. As of April 30, 1999, over 99% of
business systems requiring remediation have been remediated
and 98% of business systems scheduled for testing have been
tested. Originally scheduled for completion by December 31,
1998, remediation and testing of business systems are
presently projected to be completed by June 30, 1999. The
slippage from the previously indicated April 30, 1999
completion date is substantially due to delays in receiving
Year 2000 product updates.
For process control systems, the remediation and testing
phases are nearly complete. As of April 30, 1999, 95% of
process control components requiring remediation have been
remediated and 93% of process control components scheduled
for testing have been tested. Completion of the remaining
remediation and testing of process control systems,
originally scheduled for completion by April 30, 1999, has
been delayed until June 30, 1999. The principal reasons for
the delay are to coordinate this work with other required
equipment outages and to accommodate projects recently
included in the company's compliance program or postponed in
light of new information and the reassessment of operational
needs. Despite the revisions in the schedules for both
business and process control systems, the company remains
confident it will meet its overall program completion date of
June 30, 1999.
Westvaco has contacted all vendors whose noncompliance,
either individually or cumulatively, could materially impact
the company's business. As of April 30, 1999, 79% of vendors
contacted have responded, substantially all indicating they
have addressed or expect to address their Year 2000 issues in
a timely manner. The company continues to follow up with
vendors yet to respond satisfactorily or at all to its
inquiries. The Year 2000 disclosures of customers having
similar significance to the company's business are reviewed
on an ongoing basis. Westvaco cannot provide assurance that
the Year 2000 compliance plans of its vendors and customers,
particularly those providing broad infrastructural services
or those in international markets, will be successfully
completed in a timely manner.
Program costs are still estimated to be between $9 and $12
million. This estimate includes internal costs (i.e.,
related payroll and required downtime) and external costs
(i.e., hiring consultants to assist in compliance efforts).
Program costs do not include the cost of major new business
system implementations scheduled prior to the company's
specific Year 2000 compliance efforts described herein and
completed during the last three years. Estimated costs would
have been substantially greater but for the fact that recent
modernization of many of the company's business systems
involved the replacement of software with new software that
is Year 2000 compliant at a cost of approximately $30
million. No significant technology projects have been
deferred as a result of the company's Year 2000 program.
As of April 30, 1999, approximately $6.2 million in program
costs have been funded by operating cash flows and expensed
as incurred except for newly installed systems which were
capitalized in accordance with the company's accounting
policies. Although such costs may be significant to the
company's results of operations in one or more fiscal
quarters, Westvaco does not expect a material adverse impact
on its long-term results of operations, liquidity or
financial position. Cost estimates may be refined as
technical assessment, remediation, testing and contingency
planning continue and as compliance status information
becomes available from third-party business partners.
If Westvaco were not taking any of the remedial steps
detailed above, Year 2000 issues could possibly cause
significant technological problems for the company,
disrupting business and resulting in a decline in earnings.
At this time, however, management does not believe this will
happen.
The most reasonably likely worst case scenario should
Westvaco or any of its customers or vendors be unable to
adequately resolve Year 2000 issues would include a temporary
slowdown or abrupt stoppage of operations at one or more of
the company's facilities due to the failure of one or more
critical process control elements or business systems. Such
failures could result in interruptions in manufacturing,
safety and/or environmental systems; and/or a temporary
inability to receive raw materials, ship finished products
and process orders and invoices.
Although management does not believe that this will happen,
if such or similar scenarios were to occur, they could,
depending on their duration, have a material impact on the
company's results of operations and financial position. Such
theoretical consequences are of a kind and magnitude
generally shared with other manufacturing companies.
Assuming the successful completion of its Year 2000 program
in a timely manner, the company expects any Year 2000
disruptions which occur, should there be any, will be minor
and not material to its business.
The company is developing contingency plans for possible
business and process control systems failures. Contingency
plans may, as appropriate, include the identification of
alternate suppliers, vendors and service providers;
accumulation of inventory; identification of manual
alternatives; arranging for rapid access to qualified vendor
technical support; and enhancement of operational
communications. As developed, contingency plans will
continue to be reassessed and refined as additional
information becomes available.
As indicated above, the company does not expect Year 2000
issues to disrupt its ability to conduct business and
anticipates meeting its target date of June 30, 1999.
Program managers continue to assess compliance progress and
resource allocation to ensure the company's readiness.
However, the company operates in a dynamic business
environment which will require ongoing monitoring of
compliance efforts beyond the company's target date.
The company's program is a continuous process subject to
change and expansion at any time to include additional work
in response to reassessments or unanticipated events.
Subsequent to the completion of the original inventory phase,
for instance, some additional systems have been identified
and added to the inventory list for compliance testing, and
if necessary, remediation. Due to system acquisitions and
the number and complexity of existing systems, the company
expects some continuing additions of noncritical systems to
the inventory list. Nevertheless, the company believes the
significant headway it has made in achieving its compliance
goals will give it sufficient time to react to new
information, address unexpected circumstances, validate
contingency plans and ensure that all modifications and
upgrades of business and process control systems are
consistent with the objectives of its Year 2000 program.
Estimates and conclusions herein contain forward-looking
statements and are based on management's best estimates of
future events.
Environmental Matters
In 1995, the company authorized removal of elemental chlorine
from all of its pulp bleaching processes. This important
initiative, completed during 1997 at a cost of approximately
$110 million, represents a major step by Westvaco in
addressing subsequent EPA regulations for the U.S. pulp and
paper industry regarding air and water quality. These
regulations, known as the Cluster Rule, were published in the
Federal Register in April 1998. The company anticipates
additional capital costs to comply with other parts of these
new regulations over the next several years to be in the
range of $100 million to $150 million which will also
increase operating costs in the range of $3 million to $7
million annually. Environmental organizations are
challenging the EPA regarding certain aspects of the Cluster
Rule in the U.S. Court of Appeals. Westvaco and other
companies are participating in that litigation. If the legal
challenge by environmental organizations to the regulations
is successful, the company could face additional compliance
costs of up to $150 million over the next several years.
The company is currently named as a potentially responsible
party with respect to the cleanup of a number of hazardous
waste sites under the Comprehensive Environmental Response,
Compensation, and Liability Act (CERCLA) and similar state
laws. While joint and several liability is authorized under
CERCLA, as a practical matter, remediation costs will be
allocated among the waste generators and others involved.
The company has accrued approximately $5 million for
estimated potential cleanup costs based upon its close
monitoring of ongoing activities and its past experience with
these matters. In addition, the company is involved in the
remediation of certain other than CERCLA sites and has
accrued approximately $9 million for remediation of these
sites.
Forward-looking Statements
Certain statements in this document and elsewhere by
management of the company that are neither reported financial
results nor other historical information are "forward-looking
statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Such information includes,
without limitation, the business outlook, assessment of
market conditions, anticipated financial and operating
results, strategies, future plans, contingencies and
contemplated transactions of the company. Such forward-
looking statements are not guarantees of future performance
and are subject to known and unknown risks, uncertainties and
other factors which may cause or contribute to actual results
of company operations, or the performance or achievements of
the company, or industry results, to differ materially from
those expressed in or implied by the forward-looking
statements. In addition to any such risks, uncertainties and
other factors discussed elsewhere herein, risks,
uncertainties and other factors that could cause or
contribute to actual results differing materially from those
expressed in or implied by the forward-looking statements
include, but are not limited to, competitive pricing for the
company's products; the success of new initiatives,
acquisitions and ongoing cost reduction efforts; changes in
raw materials, energy and other costs; impact of Year 2000
issues; unanticipated manufacturing disruptions; fluctuations
in demand and changes in production capacities; changes to
economic growth in the U.S. and international economies,
especially in Asia and Brazil; stability of financial
markets; governmental policies and regulations, including but
not limited to those affecting the environment and the
tobacco industry; restrictions on trade; interest rates and
currency movements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Luke Mill Notice of Violation - As previously reported in the
company's 1998 Form 10-K, the company received extensive
information requests from the U.S. Environmental Protection
Agency ("EPA") concerning its mill in Luke, MD. The requests
were focused on whether the mill was required to obtain
permits for various capital projects undertaken since 1979.
On April 19, 1999, the Luke Mill received a Notice of
Violation ("NOV") from EPA Region III pursuant to Section 113
of the Clean Air Act. EPA alleges that the mill failed to
obtain preconstruction permits in compliance with Prevention
of Significant Deterioration requirements and failed to
install required pollution controls for three major projects
commenced at various times between 1981 and 1989. In the
same NOV, EPA has also alleged other violations of lesser
consequence regarding other regulatory requirements. The
company disagrees with EPA's allegations and believes it is
in compliance with environmental regulations. The company is
engaged in discussions with the agency.
Item 6. Exhibits And Reports On Form 8-K
(a) Exhibits:
27. Financial data schedule
(b) Reports on Form 8-K:
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.
WESTVACO CORPORATION
(Registrant)
June 14, 1999 /s/ James E. Stoveken, Jr.
James E. Stoveken, Jr.
Senior Vice President
(Acting Principal Financial Officer)
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